Outside Innovation

THE WEB 2.0 WAVE--WHY IT’S NOT A FAD

This week, I attended the Web 2.0 Expo in San Francisco. It was a great conference--meaty sessions, thousands of smart people, great logistics--all the things that matter were well-orchestrated and unobtrusive. I continue to be impressed by the O’Reilly organization and its many partners (in this case, CMP). “Spreading the Knowledge of Innovators” is the O’Reilly motto. If you want to know where lead customers are taking us--this is the place to be.

The Web 2.0 Culture: Loosely-Coupled Innovation

The Web 2.0 Culture isn’t a youth culture. There weren’t a lot of kids at this conference (although admission to the keynotes and exhibits was free or $100). In fact, most of the Web 2.0 Expo attendees have kids. The 10,000 participants ranged in age from mid-20s through 60-somethings, definitely skewed towards 30-somethings. There were seriously optimistic business/technology strategists (like me), corporate IT renegades, seasoned architects, professional developers, marketing and design professionals, lots of entrepreneurs--some on their second and third ventures--and venture capitalists, as well as plenty of professional bloggers and reporters.

The mood was optimistic. There are no evil empires that can stop innovation. Anything is possible. It’s a culture of DIY, roll your own, solve your own problems, invent a new toolset, secure in the knowledge that:

• Whatever you invent will plug into and interoperate with everyone else’s innovations
• The simplest approaches are the most elegant and valuable
• It doesn’t really matter if someone else has done something similar before
• Esthetics count--clean, crisp graphical UIs are in

Karmaloop Featured in Business Week!

I was pleased to see Greg Selkoe's Karmaloop featured in the cover story of Business Week's Small Biz edition in December. Amy Barrett was interested enough in my Karmaloop case study to spend some time with Greg and to feature Karmaloop in her article entitled  True Believers: "Passionate customers can transform your company. Here's how to make them your secret weapon."

There are a couple of great pictures of Greg Selkoe in action in this issue of Business Week!

Amy mentions a number of other interesting examples in her story, including software firm TechSmith,  educational gaming firm Tabula Digita , and sports apparel retailer On the Run--each of which have nurtured vibrant customer communities.

WEB 2.0, SOCIAL NETWORKING, AND CUSTOMERS IN CONTROL

Last week, we hosted our semi-annual Visionaries meeting for our lead users in the “Let Our Customers Re-Design Our Businesses” camp. Unfortunately, our timing isn’t so hot. O’Reilly’s Web 2.0 Summit was also last week. They have more technorati. We have customer-centric business leaders who are recruiting customers to help shift their corporate cultures to become customer-adaptive. The Web 2.0 Summit is on the West Coast. We’re meeting in Boston. But we’re both talking about many of the same things: customer-created content, customers taking control, customer communities, customers designing, sharing, and voting on each others’ creations, customers acting as promoters and marketers, customers acting as problem solvers and guides, and customers creating folksonomies.

For our customer-centric visionary business executives, Web 2.0 enablement is both a boon and a curse.

ISSUES THAT CUSTOMER-CENTRIC EXECS ARE FACING AS CUSTOMERS TAKE CONTROL

For many of our corporate visionaries--representing both large and small companies--our conversation last week puzzled over several key issues:

1. If customers want to strut their stuff, help each other and solve each others’ problems, how tightly should those customer communities be integrated into our more carefully structured customer support knowledgebases and resolution flows? Does it make a difference if we’re charging for support? Will customers pay for support if some of it is provided by other customers?
2. If customers promote our brand and contribute to our marketing and create our collateral, how do we ensure that they capture the essence of our brand image and don’t dilute it or take it in the “wrong” direction?
3. If customers are creating their own solutions and accomplishing their own results using our resources and tools, how much of their accomplishments are they willing and even eager to share? If we let them see how they’re doing compared to others, is that welcome or invasive?

What’s the Value of Customer-Contributed Content? $1.65 Billion!

Customer-created content is good business. Letting customers strut their stuff is profitable.

Google’s acquisition of YouTube is proof that customer-contributed content is shrewd business practice. Going from zero to $1.65 billion in 24 months is an admirable accomplishment. It’s the kind of accomplishment that makes most business people both jealous and incredulous. Yes, letting customers strut their stuff makes very good business sense, indeed! The content is free. Customers flock to the site to see and be seen. Visitors’ viewing, tagging and downloading habits create a natural merchandising engine. It’s cool because others thought it was cool. I can find it easily because others have tagged it.

Customers are playing the roles of Lead Customers/Users, Contributors, Guides, and Promoters.

 
Customers’ Behaviors have Changed the Business Model for the TV Industry

Customer-led merchandising is great marketing. Letting customers strut your stuff reaps advertising revenues and free publicity.

What tickles me is how fast the entertainment companies ran around in front of the customer parade. After years of posturing and hand-wringing about intellectual property protection in the era of file-sharing and easy downloading, all of the major entertainment companies signed up to take part in the spoils.

As the Google/YouTube deal was going down, the dominos fell throughout the movie biz. According to Hiawatha Bray, YouTube deals hint of new era for Net media - The Boston Globe, Universal Studios, Sony BMG, CBS, Warner Music, et al all quickly inked deals with YouTube and Google that go something like this: “It’s OK with us if customers pirate video clips from our movies and TV programming, you (Google-YouTube) tell us about them and give us 50% of the ad revenues.”

This is “found money” – additional revenues they wouldn’t have gotten. It’s also customer-led merchandising. Customers will vote with their eyeballs and their tagging and rating, highlighting as noteworthy programming that might otherwise lag in the Nielsen ratings.

Now, what about all those home videos? Will amateurs also get 50% of the ad revenues for their amazing pet tricks’ videos?

What's the Winning Formula for Unleashing Customer Innovation?

In order to foster Outside Innovation, there are three key ingredients:

1. Customers/users who are passionate about something they're trying to accomplish or something they want.
2. A deep understanding and appreciation by those customers/users of their current reality: their context, their situation, their constraints, how things are currently done
3. A clear vision by those customers/users of their ideal outcome: what it would be, how it would feel, how they would feel having achieved it, and all of their conditions of satisfaction that would need to be met.